Case Bulletin: Stuart v. Freiberg

On May 19, 2015 the Connecticut Supreme Court issued its decision in Stuart v. Freiberg, 316 Conn. 809, A.3d (2015). The ruling in this matter is notable as it addresses the necessary elements required to support a claim of accountant malpractice which allegedly was based on fraud and negligent misrepresentations. In that context, and of further interest, the court provides an extensive review of the law which is to be applied when a court addresses a Motion for Summary Judgment.

Stuart involves the latest saga in a long running dispute between three brothers (William, Jonathan and Kenneth) and claims associated with the handling of their father’s estate which began in 1993. Two of the brothers (William and Jonathan), the plaintiffs in the instant matter who are beneficiaries of the estate, challenged the actions of the third brother (Kenneth) and his conduct as trustee and executor. In his role as executor and trustee, Kenneth hired the defendant, Richard Freiberg, a CPA, in 1994. His employment lasted until 2001. During that employment, the Defendant, Freiberg, prepared financial statements.

This matter was then commenced in 2004 alleging fraud, negligent misrepresentation and accounting malpractice.

The plaintiffs alleged that they relied on these financial statements and as a result, suffered harm.

In keeping with the long and tortured history associated with this acrimonious family dispute, a drawn-out pleadings war resulted, finally arriving at the Supreme Court after almost ten years.

The issues presented on appeal addressed the elements needed to be established in order to prevail on a claim of fraud and negligent misrepresentation. Additionally, the court addressed the elements necessary to prevail in a claim for accountant malpractice, including a discussion of causation. The discussion of reliance and causation undertaken by the court as it pertains to malpractice matters provides important guidance. The court enumerated the elements which were required to be proven in order to sustain an action for fraud and negligent misrepresentation. In evaluating both claims, the court looked to whether there was actual reliance on the alleged, “false financial statements.” Without demonstrating reliance on the financial statements, the plaintiffs were unable to sustain their action. In this matter, the court held that the plaintiffs could not provide evidence which would support a claim for accountant misconduct and granted the summary judgment motion.

This case also provided the opportunity to review how a trial court should approach Motions for Summary Judgment and included an extensive review of the law of summary judgment.

It has long been accepted that summary judgment was “appropriate where no genuine issue of material fact exists, and the defendant is entitled to judgment as a matter of law, with respect to anyone element that the plaintiff is required to prove in order to prevail at trial.” Stuart at 825/826. (emphasis added)

The court went on to articulate those principals which should be applied when considering such a motion. “To avert these types of ill-fated cases from advancing to trial, following adequate time for discovery, [emphasis added] a plaintiff may properly be called upon at the summary judgment stage to demonstrate that he possesses sufficient counterevidence to raise a genuine issue of material fact as to any, or even all, of the essential elements of his cause of action,” Stuart @ 823. The court also noted that the “logic of the approach has ample support in Federal Law, which [they] found persuasive in interpreting our summary judgment rules of practice.” Stuart @ 824.

So, if a defendant is able to present a well supported motion for summary judgment as to the elements of the plaintiff’s cause of action which demonstrate that the plaintiff could not meet its burden of proof on any of the elements, then the plaintiff does not meet its burden to defeat summary judgment by raising a material issue of fact as to only some of the elements. The trial court has to look to all the elements of the plaintiff’s cause of action and if the defendant has demonstrated that the plaintiff will not be able to sustain its burden with respect to any element of the cause of action which would be required, then summary judgment should be granted.

This ruling may represent a shift in the court’s attitude toward granting summary judgment. In the past it seemed that Connecticut trial judges were discouraged from granting such motions with the guidance set out in Stuart a shift appears to have taken place.

We will continue to monitor the application of this decision at the trial court level.

The Insurance Law group at OAM provides periodic Case Alerts to their clients and colleagues concerning notable decisions, verdicts and developments which may impact this area of practice in Connecticut. They are provided for informational purposes and are not intended to convey legal advice. You may request additional information concerning any particular case by telephoning Susan L. Miller at (860) 548-1300; or by email at smiller@oamlaw.com.